Tesla Motors Financial Analysis Essay

Topics: Stock Market


In this paper I intend to supply a sound fiscal analysis of Tesla Motors Incorporated. I will make so by ciphering and supplying liquidness. profitableness. and solvency ratios and so measuring those consequences. Assessment of these ratios will more or less define Tesla Motors’ abilities to run into its short-run debts and duties ( liquidness ) . public presentation in relation to gross revenues. assets. and net incomes or losingss ( profitableness ) . and the resulting income sum. after revenue enhancement tax write-offs. against the company’s liabilities ( solvency ) .

Additionally I will compare Tesla Motors’ fiscal place against that of General Motors Company to break depict how the company is executing within its industry.

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Tesla Motors is the electric auto maker paving the route to this greener universe.

Tesla Motors is a United States auto fabricating company based in Palo Alto California. The company was founded by Martin Eberhard and Marc Tarpenning in July 2003. The historic electrical applied scientist and physicist. Nikoka Tesla. is the beginning of Tesla Motors’ company name and is really fitting. The jumping current motor used in the Tesla Roadster is really derived from Nikola Tesla’s original 1882 design.

Tesla Motors is a publicly traded company that produces to the full electronic vehicles. Tesla Motors began to set itself on the map when it produced the Tesla Roadster – the first to the full electric athleticss auto. Following the Tesla Roadster was a to the full electric luxury saloon called the Model S.

The Tesla Roadster was a immense success for the company. It was an all-electric athleticss auto capable of going more than 200 stat mis on a individual charge. It was highly advanced and the first to the full electronic car to utilize lithium-ion battery cells. The Roadster was featured on the screen of Time Magazine and received their “Best Inventions 2006 – Transportation Invention” award. The first one hundred Tesla Roadsters sold out in less than three hebdomads.

The Model S is the current criterion Tesla vehicle in production today. The auto was foremost announced in 2008 and hit the US retail market in June 2012. The Model S with its highest battery option could make distances every bit far as 265 stat mis in a individual charge. This auto has been Tesla Motor’s highest accomplishment yet being the receiver of several awards including “Car of the Year” for both Motor Trend and World Green Car magazines in 2013 and besides Time Magazine’s “Best 25 Inventions of the Year 2012” award.

Tesla Motors has programs to get down production on its newest auto. the Model X. get downing in 2014. Ratio Analysis
Investors or creditors use liquidness ratios to assist them find if a company is a safe investing or how likely they are to refund a debt. Liquidity is a step of a company’s ability when it comes to refunding go oning debts as they come due. For most liquidity ratios. analysts are looking for high Numberss ; the higher the value the better that company is at refunding short-run debts. The liquidness ratios I will lucubrate on for Tesla Motors will be the current ratio. working capital. hard currency flow from runing activities to current liabilities. stock list turnover rate. and the yearss to sell the mean stock list. The current ratio straight relates the company’s current assets against its current liabilities. A good current ratio will be over 1. For illustration if the current ratio were 2. 0 this would intend that the company’s current assets are twice every bit big as its current liabilities. For Tesla Motors the current ratio beads significantly over the old ages. It starts at 2. 76 in 2010. so drops to 1. 95 in 2011. and eventually reaches 0. 97 in 2012. As you can see the current ratio in 2012 is below one. The current ratio of 0. 97 agencies that as of December 2012. Tesla Motors has more current liabilities than current assets. The on the job capital besides has a direct relationship with the company’s current assets and current liabilities. The on the job capital should be positive in order to be considered good. To find the on the job capital the current liabilities are subtracted from the current assets.

As in the current ratio illustration the same form will demo in the on the job capital. It will worsen from 2010 to 2011 and so will go negative in 2012. This form shows a diminution in Tesla Motors ability to utilize current resources to refund its debts. The ability for a company to pay presently maturating debts from periodic operations is determined by the hard currency flow from operations to current liabilities. To cipher this ratio you divide the hard currency flows from runing activities over the current liabilities. A good scenario would be to hold a higher numerator ( more hard currency flow from runing activities ) than the denominator ( current liabilities ) . This would bespeak that the company could easy cover its current liabilities with its operating hard currency flow. Tesla Motors nevertheless does non hold a higher numerator. In fact its operating activities hard currency flow shows a negative value for all three old ages – though one thing to see is that the value has become less negative as the twelvemonth 2012 approached. Both the stock list turnover rate and the yearss to sell the mean stock list can state investors how rapidly stock list will sell on norm. A high stock list turnover rate will bespeak that a company is making good in footings of selling its merchandises and will non hold extra stock list. The yearss to sell the mean stock list will demo. on norm. how many yearss it will take to sell stock list after production. Tesla Motors fluctuates up and down within the old ages but finally settles at an stock list turnover rate of 2. 41 and 167. 80 yearss to sell the mean stock list. The stock list turnover rate of 2. 41 may look good but when compared to the industry norm Tesla Motors is missing.


Investors use profitability ratios to reason how much return they can do on the company in inquiry. These ratios show how good a company is making based on how much net income they can bring forth. The profitableness ratios will be a good contemplation of a company’s overall public presentation in footings of efficiency and net incomes. The ratios used in measuring Tesla Motors profitableness are the gross net income rate. return on equity. net income as a per centum of gross revenues. return on assets. and runing disbursal ratio.

The gross net income rate is a simple step of how profitable a company’s merchandises are. It is calculated by spliting the gross net income by the net gross revenues. A good figure for the gross net income rate would be a high positive figure. Again Tesla Motors shows lessenings as the gross net income rate falls from 26 % in 2010 to merely 7 % in 2012.

To find if the company does good utilizing investors’ capital an analyst would mention to the return on equity. You would about ever want to see a positive figure here if you were to put your money into a company. In this instance. Tesla Motors’ return on equity ratio becomes steadily more negative stoping up at -2. 27.

The net income as a per centum of net gross revenues should be a big positive figure to demo that a company is making good. Some companies show net loss instead than net income. In this instance the company is non making good and the ratio will reflect that as a negative per centum. For Tesla Motors the per centum is -96 % . This figure has become less negative than it had been in 2010 but is still non a good figure.

The return on assets ratio is a manner to mensurate the productiveness of assets. without respect to how the assets are being financed. Since Tesla Motors has a negative operating income for all three old ages we know that the return on assets for those old ages will be negative since the ratio is calculated by spliting the operating income over the mean entire assets.

A good index of a company’s ability to pull off their disbursals is the operating disbursal ratio. For this ratio a lower consequence is optimum because that would intend that the operating disbursals are low compared to the net gross revenues. The tendency for Tesla Motors indicates that the operating disbursal ratio is worsening from 2010 to 2012 which would in itself be a good thing if the ratio wasn’t already so high. In fact the operating disbursals are higher than the net gross revenues for all three old ages. Solvency

Analysts looking for a good measuring of how likely it is that a company will continually be run intoing its debts and recognition duties will turn to solvency ratios to happen replies. High solvency ratios will normally bespeak that a company has a better likeliness to refund its debts while lower solvency ratios will be deemed high hazard are less likely to be unable to refund debts. The ratios I will research for solvency are the debt ratio. involvement coverage ratio. and the tendency in net hard currency provided by operating activities. The debt ratio is calculated merely by spliting the company’s entire liabilities over its entire assets – therefore the consequence is the liabilities as a per centum of assets. This is utile for gauging long-run liquidness of a company. In this instance lower per centums indicate a safer investing. Investors would wish to see that a company’s debt is a little fraction of its resources.

Unfortunately Tesla Motors’ debt ratio increases over the old ages until it reaches a debt ratio of 0. 89. This means that their entire liabilities are 89 % of their entire assets. A company’s involvement coverage ratio is a on a regular basis used ratio used to find creditors’ safety. It reflects the ratio of runing income that is available for the payment of involvement to the one-year involvement disbursal. It is widely agreed that an involvement coverage ratio above 2. 0 is considered strong. In the instance of Tesla Motors the involvement coverage ratios are wildly negative – although they have improved from 2011 to 2012. The tendency in net hard currency provided by runing activities dictates an entities ability to bring forth the hard currency needed in order to refund its debts and duties. Tesla Motors’ trends in net hard currency provided by operating activities are negative which is non good. It shows a deficiency in the ability to bring forth hard currency for duties and does non look safe.

GM Comparison

General Motors is an constituted auto maker and a rival of Tesla Motors. The companies differ in merchandise offering in that GM produces standard vehicles while Tesla produces electrical vehicles. General Motors is a big and good known maker and represents a good part of the industry.

Most analysts would state you that as of 2012 General Motors has been in a better fiscal place than Tesla Motors. That seems to be true every bit far as the Numberss reflect. For illustration I mentioned earlier that Tesla Motors’ current ratio was 0. 97 significance that as of December 2012. Tesla Motors has more current liabilities than current assets. The current ratio for GM peers out to be 1. 30. This means that General Motors has more current assets than current liabilities.

Again Tesla Motors’ stock list turnover rate and yearss to sell the mean stock list are 2. 41 and 151. 73 severally for 2012. General Motors has much better Numberss with an stock list turnover rate of 9. 77 and 37. 35 yearss to sell mean stock list for the same twelvemonth.

One interesting comparing between Tesla Motors and GM is the gross net income rate. As it turns out the Gross Net income rate is equal between the two companies for 2012 at 7 % . This similarity shows that both companies have about the same ability to pay their operating expense.

It is pretty clear that GM has Tesla round in most countries right now. There are so many negative values in the Tesla computations that I had to treble look into my work to do certain I wasn’t doing errors in the computations. One of the most of import things to observe is that Tesla has been runing at a loss for each twelvemonth while GM has systematically posted income.


Based wholly on the analysis provided in this paper I would non happen Tesla Motors to be a worthwhile investing. The ratios and computations of liquidness. profitableness. and solvency do non reflect good consequences. Even consequences that are slightly ‘ok’ are missing when compared to rivals within the industry.

Interestingly the twelvemonth 2013 looks to hold been a great twelvemonth for Tesla Motors. The March 31 2013 quarterly income statement is the first to demo net incomes in old ages. The Tesla Motors stock monetary value has skyrocketed from near $ 30 per portion at the terminal of 2013 to near $ 200 a portion current twenty-four hours. I think Tesla Motors continual operating losingss and negative ratios can be attributed to research and development among other startup costs.

Tesla Motors has increased in celebrity and popularity all over the universe and I would non be surprised if they did non have a big sector of the car industry in the hereafter. With this cognition I may hold to reconsider whether I would put in Tesla or non. One thing is for certain ; electric vehicles are the hereafter of autos and Tesla Motors is paving the manner.


1. Financial & A ; Managerial Accounting 16th Edition – Williams et Al. 2. Yahoo Finance: Tesla Motors. Inc. ( TSLA ) – World Wide Web. finance. yokel. com 3. Tesla Motors Website – World Wide Web. teslamotors. com

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Tesla Motors Financial Analysis Essay. (2017, Aug 25). Retrieved from https://paperap.com/paper-on-tesla-motors-financial-analysis-essay/

Tesla Motors Financial Analysis Essay
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